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The Obama administration announced this afternoon that Pennsylvania will expand Medicaid under the Affordable Care Act, bringing another half million Americans health care coverage under the law.

Pennsylvania Gov. Tom Corbett, a Republican in a tough race to be re-elected, reached a compromise with the Obama administration to allow the state to expand Medicaid through managed-care organizations. The deal should be a boost to private health insurance companies in the Medicaid business like (AET), (UNH), (HUM), Molina (MOH) and Centene (CNC).

English: Barack Obama delivers a speech at the University of Southern California (Video of the speech) (Photo credit: Wikipedia)

More GOP-led states are pondering ways to expand Medicaid. Under the health law, the federal government picks up the entire tab of expansion through 2016 and more than 90 percent of the bill for several years after that.

The federal government traditionally picks up a little more than half of the cost of Medicaid. But funding under the health law is unlike past efforts to expand Medicaid in that the federal government will pick up the full tab this year as well as 2015 and 2016. The state gradually has to pick up some costs in 2017, but by 2020, the federal government is still picking up 90 percent or more of the Medicaid tab.

At least one group believes the remaining states will eventually expand Medicaid under the health law.

“This step by Pennsylvania is indicative of an inevitable movement that will ultimately result in Medicaid expansions in all states across the country,” said Ron Pollack, Executive Director of Families USA, a health care consumer group in a statement issued this evening. “In reaching agreement with CMS, Governor Corbett joins Republican governors in Arizona, Iowa, Michigan, Nevada, New Jersey, New Mexico, North Dakota, and Ohio who realize it makes no sense for states to pass up the availability of unprecedented federal funds to help low-income uninsured people receive much-needed health care. It would be an act of fiscal malpractice for governors to turn down this money.”

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